Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.

Natural Gas Hits New Highs

Posted Tuesday, June 8, 2010, at 9:29 AM

Natural gas shot over the $4.80 per million BTUs mark as traders aggressively bought the fuel in a flurry on Thursday and Friday. The market soared on rumors that an expanded federal moratorium on offshore drilling could affect natural gas production as well. On this news, natural gas decisively broke over $4.50 for the first time in months.

Natural gas has recently gained favor as the BP oil crisis in the Gulf of Mexico has put negative attention on crude oil. Natural gas can be used as a less expensive petroleum substitute for some applications, and environmentalists favor it because it emits fewer air pollutants. As of Friday midday, July natural gas was trading at $4.81 / MMBtu, up 20% in the last 10 days.

Jobs Data Sours Markets

After a generally optimistic week, negative sentiments returned on Friday, erasing many markets' gains. A government job report released on Friday showed an increase in employment of 411,000 jobs, less than analysts had expected. This news shocked economic-driven markets, leading to a sizeable sell-off. Equity markets dropped about 2.5%, causing crude oil to fall $2.50 per barrel to $72 (-3.5%) while copper dropped 12 cents per pound to $2.83 (-4%).

U.S. wheat prices continued their downward trajectory this week, with the July wheat contract hitting a new low of $4.38 per bushel on Friday. The market has been hampered by a large global supply and recent good growing weather in the US wheat belt has served to worsen the supply glut. Over the last month, wheat prices have fallen 79 cents per bushel, a massive 15% decline. This plummet has many traders wondering how far prices can fall, prompting them to recall the sub-$4.00 wheat prices seen during the early part of last decade. Although the market may not return to those prices, the past serves as a poignant reminder to traders that the seemingly low prices seen now are not unheard of.